Jane Street Questions Ongoing Upgrade: 'Bitcoin's 10-Point Plunge' Disappears After Lawsuit

Wall Street Journal reported that on February 24, the court-appointed bankruptcy trustee for Terraform Labs filed a lawsuit against Jane Street in the U.S. District Court for the Southern District of New York, accusing the quant trading firm of frontrunning trades using non-public insider information from Terra insiders during the Terra ecosystem collapse and profiting from it. The lawsuit alleges Jane Street established a secret communication channel with Terraform Labs’ internal staff via former intern Bryce Pratt to obtain confidential non-public information. On May 7, 2022, Terraform Labs withdrew 150 million TerraUSD (UST) from the Curve liquidity pool without prior disclosure. Jane Street followed up by withdrawing approximately 85 million UST through an associated wallet within 10 minutes—completing a frontrun before market-wide panic set in and UST fully depegged. The suit claims this illegal activity generated profits and accelerated the collapse of Terraform Labs and its ecosystem. In response, a Jane Street spokesperson called the lawsuit an attempt to extract money from the firm, adding it will “vigorously defend its rights against baseless, opportunistic charges.” Beyond the Terra case, Jane Street faced market manipulation allegations in India last year: roughly 4.843 billion rupees (≈$565 million) in assets were frozen, and it was barred from trading in India’s securities market. Rumors also circulate that Chinese regulators are reviewing Jane Street’s activities in the Chinese ETF market. The crypto community has noted that since the lawsuit was filed, the daily “10 a.m. EDT Bitcoin dump” has abruptly vanished. Bitcoin has risen 10%, adding ~$120 billion to its market cap, and its weekly chart turned green for the first time after five consecutive red candles. The total crypto market cap has also climbed nearly $200 billion. Bloomberg ETF analyst Eric Balchunas commented: “The ‘threat’ is gone—that’s the vibe you get in Crypto Twitter (CT) and from today’s price action. Those big sharp intraday drops before had all but ruined every rebound and eroded confidence. But is just removing that threat enough to underpin a sustained bounce? We’ll see.” Speculation around Jane Street has reignited debates about Bitcoin spot ETF trading mechanisms. Analysts note that Authorized Participants (APs) can create and redeem ETF shares under a regulatory exemption framework, without necessarily needing to immediately buy or sell Bitcoin on public markets. In cases like futures contango, APs may hedge via futures or other derivatives—creating a time lag between ETF fund inflows and spot buying pressure, which impacts short-term price performance. As a top global quant trading giant, Jane Street has a massive footprint in crypto, focusing on infrastructure, DeFi, and crypto mining. Its crypto-native project investments include ZetaChain, Arbitrum, 1inch, Euler Finance, Membrane Labs, Kaito, and Vest Exchange. On the equity side, Jane Street has significantly increased stakes in multiple crypto mining firms via the secondary market between 2024 and 2026: ~5.4% of Bitfarms (BITF), ~5% of Cipher Mining (CIFR), and ~5% of Hut 8 (HUT). Last year, it also participated in multiple funding rounds for Kraken. Jane Street is additionally a key liquidity provider and shareholder for Coinbase.